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A mashed Toyota car sits amid the tsunami rubble at Otsuchi town in Iwate prefecture, Japan. The Japanese auto industry is likely to remain a potent force, but manufacturers will supply their brands from plants that are less vulnerable to earthquakes and other disasters.

It doesn’t take much to bring an automotive assembly line to a halt, according to John Mendel, CEO of Honda’s U.S. subsidiary, even “something as small as a speedometer needle.”

It’s a lesson the automaker has had driven home after the earthquake and tsunami that struck Japan on March 11, killing tens of thousands and all but shutting down the country’s auto industry for the better part of a month. Since then, shortages of various parts and components, some as small a speedometer needle, have forced a sharp cutback in production by Japanese automakers.

The disaster has led many companies, including Toyota, Nissan and many automotive parts makers, to consider whether they should reduce their dependence on factories built in quake-prone and increasingly high-cost Japan. The so-called “hollowing out” of the Japanese auto industry has been under way for a number of years, but the pace seems certain to accelerate in the wake of the March disaster.

“I fully understand that we can’t go on with just a desire to protect manufacturing in Japan,” lamented Toyota’s CEO Akio Toyoda last month as he announced that the carmaker’s January-to-March profits had plunged by 77 percent.

Even though the disaster occurred during the final weeks of the quarter, it cost Toyota more than $1.25 billion in losses. That figure is expected to grow substantially in the months ahead. Just through the end of March the maker lost an estimated 170,000 units of production. The number will likely surge closer to the million mark before Toyota production is fully back to normal, which it doesn’t expect until November or December.

Toyota is by no means alone. Honda, Nissan, Mazda, Suzuki … there isn’t a Japanese carmaker that hasn’t felt the impact of the crisis. And the disaster has reached well beyond the confines of the home islands. Honda last week revealed production of the all-new 2012 Civic, produced at plants in Indiana and Ontario, won’t be back to normal until “sometime in the fall.”

But the biggest impact from the disaster has been in Japan, where it has been more difficult for carmakers to find alternative sources for parts in short supply, including onboard microprocessors, resin and rubber components.

Yet that is only one reason why automotive executives are rethinking where they need to put their factories. The 110 billion yen loss attributed to the earthquake was dwarfed by 290 billion yen in losses due to shifting exchange rates.

With the dollar approaching record lows compared to the yen it’s “increasingly looking like the only thing [automakers] could afford to build in Japan are luxury cars and products for the domestic market,” said John McElroy, a longtime automotive analyst and host of the television program "AutoLine Detroit."

With nearly half its production based in Japan, Toyota is clearly the most vulnerable to shake-ups, whether they rock the ground or financial markets. The carmaker says that one yen of appreciation for the Japanese currency translates into a 30 billion yen hit to its bottom line. Toyota expects little moderation in the months to come and is now forecasting the yen will reach 86 yen to the dollar, compared to an earlier projection of 85 to 1.

One of the most cautious and conservative of the Japanese automakers, Toyota has nonetheless been moving production offshore at a steadily growing pace. But it lags behind Honda and Nissan, the latter today producing barely a quarter of its total volume at home market plants.

Japanese auto and truck plants produced a grand total of 9.6 million vehicles in 2010, compared to 7.7 million vehicles assembled in the United States. Due to quake-related shortages, analysts say production volumes could come close to parity in 2011; while Japanese “transplant” lines have had to trim back, Detroit plants, and those run by Korean and European makers are largely picking up the slack.

Longer-term, most observers anticipate a continued hollowing out of Japan’s automotive production base. The U.S. continues to benefit. Once it became clear brands like Toyota and Honda could achieve comparable productivity and quality levels with U.S. workers, the carmakers saw numerous advantages to building vehicles in the same market where they’re sold. Shipping costs were lower, for one thing, and using a just-in-time production base allows a carmaker to better respond to sudden shifts in market demand.

There’s also a practical reality. In recent years carmakers like Toyota have had a more difficult time luring young workers to their plants, where many employees traditionally lived in Spartan corporate barracks, notes McElroy. The country’s rapidly declining population is worsening the challenge of keeping a trained and motivated workforce.

Japanese automakers aren’t the only ones rethinking their factory plans.

Among the suppliers impacted by the March 11 disaster was German chemical firm Merck, which operates a one-of-a-kind paint pigment plant in Japan’s quake-devastated northeast. Ford was one of a number of carmakers forced to curb orders for certain hues dependent on that plant’s products. The facility recently resumed operations, but Merck says it will now build another pigment plant outside Japan.

Other suppliers, such as Renesas, one of the world’s largest automotive microchip vendors, are feeling pressure to move at least some production. And many suppliers will shift operations to stay close by to customers like Toyota or Nissan.

The Japanese auto industry is likely to remain a potent force, but increasingly manufacturers will supply their brands from plants that are less vulnerable to earthquakes, exchange rates and other disadvantages that have been making the Land of the Rising Sun a difficult place to do business.

Using a compressor to cram more air and fuel into an engine is an increasingly popular way for carmakers to deliver the power consumers demand. The first turbocharged Indy car appeared in Freddie Agabashian’s Cummins Diesel Special of 1952.

“Racing improves the breed.”

That’s the axiom long used to explain carmakers’ participation in racing. Skeptics say they don’t see the connection, but the Indianapolis Speedway was built in 1906 primarily to be used as a test track by carmakers. The circuit launched its signature 500 mile race in 1911, making this year’s Memorial Day classic the centennial event (there have not been 100 races in that time because of the interruption of World War II).

During that century the Speedway has seen abundant innovation that is beneficial to the production cars we drive every day. Here are 10 of those major advances.

Rear view mirror

GM
/
Wieck

In 1911 it was common practice for race cars to carry a driver and a co-pilot, the “riding mechanic.” No, he wasn’t supposed to fix the car on the fly; he was supposed to warn the driver when he was being overtaken. Inaugural race winner Ray Harroun saw no reason to carry the added weight of a passenger and fitted his single-seat Marmon Wasp racer with what’s thought to be the world’s first rear-view mirror. Other drivers groused that this wasn’t safe or fair, but they all immediately switched and the car industry followed.

At highway speeds aerodynamic drag is something between a nuisance and a waste of energy. At racing speeds it is aero drag that puts the brakes on top speed, so it has been primary area of focus for Indy cars from the beginning, as evidenced by this steam-age streamlining of Ray Harroun’s 1911 Marmon Wasp.

Today, cars like the Toyota Prius and Honda CR-Z cheat the wind to maximize fuel economy, but the understanding of aerodynamics as applied to ground vehicles (which differs from aircraft aerodynamics because of the interaction between the car and the ground) comes from high-speed racecars like those at Indy.

Four-wheel hydraulic brakes

Indianapolis Motor Speedway

Today we take the effective performance of hydraulic brakes at all four wheels as a given but for the first few decades of the car industry cars braked only two of the wheels. That braking system was probably mechanical, owing more to the brake on pioneers’ Conestoga wagons than today’s brakes.

Racers place higher demands on their brakes than street drivers, so the Duesenberg Motor Co. entered a racer in the 500 fitted with hydraulically operated brakes at all four wheels in 1921. The success of such systems in racing led to their adoption in production cars, providing safer, more effective braking than is possible with mechanical systems.

Front-wheel drive

Indianapolis Motor Speedway

The Austin Mini Cooper introduced the modern transverse engine, front-drive design to production cars in 1959, but Miller racing cars were winning the Indy 500 in 1924 using front-wheel-drive. In the Miller the engine sat in front, aligned front-to-back rather than transversely, and sent power to the front wheels rather than the rears, as is normally the case in Indy cars in recent decades. Front-drive lends stability in slippery conditions, so it was beneficial when even racing tires were hard and free of grip.

Front-drive also allows more cabin space in production cars, so the absence of the driveshaft to the rear wheels let the driver sit lower in a racecar, cutting wind resistance and boosting top speed.

Tires were skinny in 1932, so this helped the car put the power to the ground more effectively. It also equalized tire wear, which can provide a significant advantage in the closing laps. It can also reduce the number of pit stops needed to change tires, saving even more time.

Today companies like Audi and Subaru specialize in all-wheel-drive cars and most manufacturers offer all-wheel-drive versions of their popular models thanks to the advances in building compact, lightweight all-wheel-drive hardware for racing cars.

Turbocharging

Indianapolis Motor Speedway

Using a compressor to cram more air and fuel into an engine is an increasingly popular way for carmakers to deliver the power consumers demand with the fuel economy the government mandates. Racers (and aviators) knew this from early on, and the first turbocharged Indy car appeared in Freddie Agabashian’s Cummins Diesel Special of 1952. Turbocharging is ubiquitous today in diesel vehicles and will likely be equally so among gas cars in the near future.

Seat belts

Paul Sancya
/
AP

Drivers were understandably reluctant to be tethered to the race cars when the huge tanks of gasoline fuel made the cars little more than four-wheeled napalm bombs. They witnessed the pyrotechnic demise of colleagues too often to trust the idea of strapping themselves to their machines.

But eventually they concluded that the added survivability in more common crashes offset the fear of fire, especially once drivers' fire suits derived from military pilot suits came into use. By 1956, Ray Crawford decided to use seat belts in his car and had the misfortune of testing the belts in a fairly minor front impact crash.

Recent auto show concept cars from Jaguar and Audi confirm the potential value of turbine engines as generators for hybrid-electric cars. The engines are compact, lightweight, simple, smooth, efficient and will happily burn nearly any combustible liquid. Some of these same attributes also made turbines appealing to racers, a notion which reached fruition with the 1967 Indy 500. Wide-open rules in those days allowed Parnelli Jones to race using a helicopter engine in his all-wheel-drive STP race car.

Crash data recorders

Delphi

Today when controversy erupts regarding the cause of a car crash, it is often possible to gather clues from the on-board data recorder. That occurred last year in the infamous crash of a California police officer in a service loaner car when the gas pedal was snagged on a floor mat.

In 1993 the Indy 500 mandated on-board data recorders in race cars for the same reason, using components provided by parts-maker Delphi. Use in Indy cars helped prove the technology in today’s new cars and advanced understanding of race crashes which improved race driver safety.

Renewable ethanol fuel

Indianapolis Motor Speedway

Racer Leon Duray debuted ethanol as a race fuel in the Indy 500 in 1927, exploiting the fuel’s naturally high octane to make extra power. That was the exception however, and other competitors stuck with gasoline until a terrible gasoline-fueled fire during the 1964 race. Organizers switched to alcohol fuel in 1965 to make firefighting easier in the event of such a crash. As every bartender knows, alcohol mixes easily with water, but gasoline and other petroleum mix, like, well, oil and water, making it harder to extinguish a gasoline-fueled fire.

After four decades of using methanol, Indy switched to corn-based ethanol in 2006. This year they’ve changed again, to E85 to help pave the way for wider-spread adoption of this blend of 85 percent ethanol and 15 percent gasoline in production cars.